A Choice Worth Having

Professor Schwartz is the Dorwin Cartwright Professor of Social Theory and Social Action at Swarthmore College. He studies the relationship between economics and psychology, delivering startling insights into modern life. In his 2004 book The Paradox of Choice, for example, Schwartz tackles one of the great mysteries of modern life: Why is it that societies of great abundance — where individuals are offered more freedom and choice (personal, professional, material) than ever before — are now witnessing a near-epidemic of depression? Conventional wisdom tells us that greater choice is for the greater good, but Schwartz argues the opposite: He makes a compelling case that the abundance of choice in today’s western world is actually making us miserable.

On his new blog, Schwartz is writing about various issues of public concern offering his insightful perspective as a psychologist interested in the intersection of psychology and economics. Please have a look (here), and share some of his posts with anyone who you think might be interested. We look forward to reading his posts, and we’re confident that our readers will agree that the new blog is one of The Choices Worth Having.

After President Barack Obama figures out how to bring the economy out of recession, stabilize financial institutions, end two wars, and get every citizen health insurance, there is something else that he should consider: The United States needs a Council of Psychological Advisors.

This new body would parallel and complement the Council of Economic Advisors. When economists have the president’s ear, all their whispers concern incentives and self-interest. We need psychologists whispering in his other ear, about the economy, education, healthcare, and more.

On the Economy—Understand the “Irrational” Where did our financial institutions go wrong? Many accounts focus on greed, fear, and lack of trust. And why did things get so out of hand? Why was there a housing “bubble”? Somehow, “irrational exuberance” (Robert Schiller) or “animal spirits” (John Maynard Keynes) overwhelmed rational calculations of risk and reward. And it isn’t just that irrational optimism, or even blindness to market fundamentals, gets the better of our rational faculties. Rather, as George Soros has pointed out, these psychological phenomena can become part of a feedback loop that actually changes market fundamentals. “Reflexivity,” he calls it. The housing bubble was not the first such phenomenon, nor will it be the last.

Economists offer little that helps us understand why such bubbles occur or how they might be prevented. They also have little to tell us about how to prevent a “downward spiral of negative expectations” that makes fear of an economic downturn self-fulfilling. Economists largely make assumptions about the rationality of human decision-making and proceed from there. Witness Alan Greenspan’s recent admission that he was mistaken in assuming that markets operate rationally and efficiently. The current crisis makes it clear that ignoring the real psychology of greed, fear, trust, and irrational enthusiasm (0r pessimism) can be perilous. Economists offer little that helps us understand why such bubbles occur or how they might be prevented. A Council of Psychological Advisors could help.

On Education—More than Just Carrots and Sticks: One of President Obama’s top priorities is to improve the quality of American education. This will require recruiting and retaining excellent teachers and finding ways to motivate students. How can this worthy goal be achieved? At the moment, we’re pointing in the direction of school choice and competition to produce better schools, higher pay to produce better teachers, big tests to monitor their performance, and financial incentives to motivate students. A bunch of carrots and sticks. Will these kinds of measures be enough? Research in psychology suggests not. More important than pay (as long as it is adequate) are working conditions that allow teachers to be flexible, autonomous, and creative in their work with students, and that provide teachers with a sense that they are working in a community that has a common purpose. From this perspective, the regimentation of instruction ushered in by big-test accountability is actually counter-productive. And so is the move, now being tried in pilot projects around the country, to pay students for showing up to class and for getting good grades. A Council of Psychological Advisors could help design environments that encourage students to pursue mastery rather than money and teachers to view their work as a calling.

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Moving Beyond GDP: Finally, let us ask the most fundamental question: what is public policy for? We aim to increase collective welfare, but just what does welfare consist in? For the most part, under the sway of economic thinking, our aim has been to make the country more prosperous-to increase per capita GDP. The appeal of this goal is two-fold. First, we assume that if people are richer, they will be freer to choose as individuals the objects and activities that serve their welfare. We (the state and its technocrats) don’t have to choose for them. So wealth serves as a proxy for everything else. And second, GDP can be measured. But like a drunk looking under a lamp post for his car keys, even though he dropped them someplace else (because “that’s where the light is”), it doesn’t help much to pursue what you can measure if what you’re measuring is the wrong thing. It doesn’t help to get better at achieving goals if you’re achieving the wrong goals. Much research in the psychology of well being suggests that some wealth-enhancing policies improve welfare, but others do not. Indeed, some of what it takes to get more prosperous may be counterproductive when it comes to well being. A Council of Psychological Advisors can help here too, in the design of a system of national “psychological accounts” that does a better job of measuring well being than per capita GDP ever could.

Many of us hold out the hope that the coming Obama administration will mark a return to respect for knowledge and expertise. Agencies will be run and staffed not by political cronies, or by people who “just know in their gut” what needs to be done, or by ideologues, but by people who actually have respect for evidence. It would be a shame to bring experts on board in existing agencies, only to have them have to rely on personal intuition rather than knowledge in formulating policies and making decisions that could benefit from psychological expertise. A Council of Psychological Advisors is long overdue. This would be an excellent time to create one.

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To read the entire post, click here. For a sample of Situationist posts discussing research by Barry Schwartz. click here.